The Citywire AA-rated manager says Italy in particular is providing opportunities as investors overlook the market, spooked by movements in the bond market. Yields on Italian government debt put the country in a similar camp to its Mediterranean neighbours.

But Gaskell believes the country is ‘very different’ from Portugal, Spain and Greece, and has been ‘dragged down’ by the others. ‘It’s a country that has a lot of wealth in the private sector. They just didn’t pay their taxes for a lot of years,’ she says.

‘It will have close to a balanced budget and be one of the least overdrawn governments [once reformed]. Plus, the government is made up of bureaucrats and businessmen, and we think the next thing they will do will be in terms of state spending and privatisation, so Italy will be a country that has a very low deficit next year.’

Gaskell's European picks

Gaskell points to Italian motorway service station company Atlantia SpA (0I2R.L) as a case in point, with enough cash in its coffers to invest in its outlets while paying a 7% dividend yield despite being hindered by slowing growth.

‘It’s expanding and upgrading [its] motorway network and has a long track record of managing that across cycles. It has been affected by the weakness in the Italian market but our view is that the company is stable enough,’ she says. ‘Around 30% of its earnings come from Latin America and it is growing at a rate of 5-10% per year.’

Looking across Europe, she highlights global chemical company BASF(BFA.L) as another firm with a solid dividend stream, an A credit rating and strong free cashflow yield. With the stock yielding 7% compared with the bond’s meagre 1.5%, it makes sense for investors to snap up the shares.

‘There’s a lot of money going in to corporate bonds and BASF’s bonds only yield 1.5%. If you stand back and say “this is a good company that’s unlikely to go bust in most scenarios”, you could either earn 1.5% from the bond or 7% from the equity,’ she says.

She also likes oil stock ENI(0N9S.L), which the French authorities have recently allowed to sell off some non-core assets that it had previously been blocked from selling. The company has also had some success in recent oil field exploration, and is yielding 6%.

While European retailers have fallen out of favour with investors and dominant players such as Carrefour facing the prospect of widescale restructuring, Gaskell has picked out Netherlands-based supermarket chain Ahold(0NYX.L) as a key holding in the fund.

The company derives the bulk of its profits from the US, where Gaskell believes the consumer recovery is further advanced, and it is paying a healthy 4.5% yield.

‘The new management are delivering a strategy of steady growth and gaining market share. It’s paying an attractive dividend and buying back shares for the last few years. It has a very clear commitment for rewarding shareholders for owning the company,’ she says.